Outlook bleak for next year’s exports: bank

Taiwan’s exports are unlikely to grow steadily next year given ongoing political wrangling in Europe and fiscal problems in the US, Bank of America Merrill Lynch said in a recent report.

Exports dropped 1.9 percent annually last month, well below market expectations of 2 percent growth, the bank said. A 36.1 percent decline in the value of information technology and communications product shipments was the main culprit, dashing investors’ hopes for a sustainable recovery, Merrill Lynch said.

“In our view, Taiwan’s road to export recovery will likely remain very bumpy in 2013,” Marcella Chow, a Hong Kong-based economist at Merrill Lynch, wrote in a report on Thursday.

Though export growth will probably rebound to mid-single-digit annual growth in the next few months due to a lower base of comparison, exports will only resume a healthier pace of growth when demand in external markets stabilizes and shows sustained strength, she said.

Next year’s export prospects depend on improving demand in China, which will be driven by more supportive measures as the political dust settles after Beijing’s leadership transition and top policymakers shift their focus to stimulating economic growth, Chow said.

Another key factor will be whether external demand in developed economies picks up and vendors rebuild their inventories, which would help underpin a firm recovery in Taiwan’s exports, she added.

Chow believes the inventory cycle has already nearly hit bottom, though the recovery process will likely be delayed as political wrangling in Europe and the US’ “fiscal cliff” could cause uncertainty shocks for manufacturers.

“In our view, whether China’s policy offsets a slowdown in demand stemming from US austerity measures will probably be the biggest swing factor for Taiwan’s export performance next year,” she wrote.

As a result, Chow forecast the nation’s exports will grow at a rate of between 2 percent and 6 percent next year.

Earlier this month, British bank Barclays PLC said Taiwan’s exports are likely to improve this month as the momentum of its information and communications technology exports remains robust. The improvement should be driven by new smartphone models from Taiwan’s HTC Corp (宏達電) and a boost from Apple Inc’s recently launched iPad Mini and other tablets.